Beginning June 15, the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, will require both agencies to give short-sale buyers a final decision within 60 days.
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Under this same guideline, Fannie Mae and Freddie Mac also must respond to initial requests for a short sale within 30 days of receiving the buyer’s submission.
According to one analyst, expedited sales as a result of the new directive will benefit the entire housing market. They could also remove some risks for buyers – many of whompreviously had to wait months for a decision and then ended up not getting the house they wanted.
Lenders favor short sales because they are less costly and more efficient than foreclosures. Yet the homeowners, trying to exit as gracefully as possible, never know how long the process will take or how badly their credit will be hurt.
Although short sales have a reputation for being easier on credit scores than foreclosures, Experian says that is a “fairly common misperception.” If there is a difference in impact, according to Experian, it is slight.
Both short sales and foreclosures remain on the credit report for seven years, but foreclosures don’t appear until the legal paperwork is filed, and that could take months.
The effect was measured by an analysis by VantageScore, a provider of credit scores used by lenders. The higher the credit rating a consumer has, the more points he or she would lose in a short sale.
If consumers started with an 830 score, they would most likely lose 100 to 110 points from a short sale, 120 to 130 points from a foreclosure. But a homeowner with a 625 score, who is behind on his mortgage and some credit card payments, would lose 15 to 25 points from a short sale and 10 to 20 points from a foreclosure.
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